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Antitrust Merger Review Costs and Acquirer Lobbying

65 Pages Posted: 11 Dec 2017  

Jana P. Fidrmuc

Warwick Business School - Finance Group

Peter Roosenboom

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM)

Eden Quxian Zhang

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM); Monash University

Date Written: December 1, 2017

Abstract

Documenting the US antitrust review process for M&As in detail, we unveil that regulatory costs and risks are significant and that mitigating these risks via lobbying by acquirers may benefit shareholders. Our results show that an adverse antitrust review outcome leads to a decline of 2.8 percent in acquirer firm value. We also show that lobbying before deal announcements is associated with more favorable review outcomes. At the same time, higher pre-announcement lobbying is valued by shareholders, especially in horizontal deals and deals with a larger expected change in market concentration, which have higher antitrust concerns. However, this positive value effect of lobbying applies only in firms with strong corporate governance. Post-announcement lobbying, concurrent with the antitrust review process, increases with adverse review outcomes. Our results highlight the role of political connections in corporate investments when facing regulatory costs and risks.

Keywords: mergers, antitrust, corporate lobbying

JEL Classification: G34, G38

Suggested Citation

Fidrmuc, Jana P. and Roosenboom, Peter and Zhang, Eden Quxian, Antitrust Merger Review Costs and Acquirer Lobbying (December 1, 2017). Available at SSRN: https://ssrn.com/abstract=3083503

Jana P. Fidrmuc (Contact Author)

Warwick Business School - Finance Group ( email )

Warwick Business School
Coventry CV4 7AL
United Kingdom

Peter Roosenboom

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T09-56
3000 DR Rotterdam
Netherlands
+31 10 40 82255 (Phone)

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Eden Quxian Zhang

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

Melbourne, Victoria
Australia

Monash University ( email )

Wellington Road
Victoria, Roodepoort 3145
Australia

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